LawFlash

Just when all things Affordable Care Act appeared to have settled in Congress, a federal district court in Texas has weighed in and ruled that the ACA—implemented over the last eight years and central to the nation’s healthcare system—is unconstitutional. However, all provisions of the statute remain in place pending appeal of the decision.

Texas v. Azar

The healthcare industry has long awaited a decision in Texas v. Azar, since the US District Court for the Northern District of Texas heard arguments this past September. The decision came on the evening of December 14 in a complex 55-page opinion. The case, filed by 20 state attorneys general and governors and two individuals in February 2018, alleges that when Congress zeroed out the penalty for the individual mandate under the Tax Cuts and Jobs Act of 2017, it invalidated the Affordable Care Act (ACA) because the US Supreme Court in National Federation of Independent Businesses v. Sebelius had concluded that an individual mandate without a tax penalty is unconstitutional.

The Trump administration declined to defend the constitutionality of the individual mandate but asked the court to delay its decision until after the health insurance exchange open enrollment concluded on December 15, and to defer any holding as to the severability of the individual mandate to the following year. A number of states intervened in the lawsuit, arguing that the individual mandate remains constitutional. They also argued in the alternative that should the individual mandate be invalidated, that provision should be severed from the ACA, leaving the rest of the law intact in accordance with congressional intent.

In dismissing the requests of both the administration and the intervenor states, Texas federal district court Judge Reed O’Connor held that the entire law is invalid and unconstitutional. An appeal is a virtual certainty.

No Immediate Impact

This was underscored in a statement released by the US Department of Health and Human Services on December 17:

The recent U.S. District Court decision regarding the Affordable Care Act is not an injunction that halts the enforcement of the law and not a final judgment. Therefore, HHS will continue administering and enforcing all aspects of the ACA as it had before the court issued its decision. This decision does not require that HHS make any changes to any of the ACA programs it administers or its enforcement of any portion of the ACA at this time. As always, the Trump Administration stands ready to work with Congress on policy solutions that will deliver more insurance choices, better healthcare, and lower costs while continuing to protect individuals with pre-existing conditions.

Thus, the ACA’s insurance access and coverage requirements, protection for individuals with preexisting conditions, and provisions addressing the Medicare and Medicaid programs—including those governing Medicaid expansion—remain active and enforceable while the litigation progresses through the appeal process.

Next Steps

It is anticipated that Judge O’Connor’s decision will be procedurally stayed and that an appeal will be filed with the US Court of Appeals for the Fifth Circuit; the case could potentially make its way up to the US Supreme Court in the future.

The most likely candidates to appeal the decision are the states that intervened in the lawsuit to argue that the individual mandate remains constitutional: California, Connecticut, District of Columbia, Delaware, Hawaii, Illinois, Kentucky, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, and Washington State.

Alternatively, the US House of Representatives, which will have a Democratic majority next term, has indicated that it may seek to intervene in the litigation when the new Congress convenes in 2019. It is also possible that the Senate will undertake legislation to secure some of the ACA’s more popular consumer protections such as protecting people with preexisting conditions.

One thing is definite: The controversy over the ACA continues as the future of the law remains uncertain.

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